1. BY: TERRI THOMPSON U.S. NEWS & WORLD REPORT, JUNE 6, 1988 YOUNG SUN KEY Crash-Proofing the Market; A Lot of Expert Opinions, but Few Results

2. What Happened in October, 1987?

3. What Caused the Crash? Overvaluation of stocks – the Dow peaked at 2,722 in late August Computerized trading techniques Intricate links between the markets for stocks, stock-index futures and options

4. Pros - Greenspan Cons - SEC, NYSE Provides economic value to pension funds and other big institutional investors as well as liquidity and stability for the stock market Steepens the market’s routine ups and downs Using Computerized Trading Techniques

5. What Needs to be Done?BAKERRUDERBOWSHERBRADYPosition Treasury Secretary SEC chairmanGeneral Accounting Office Presidential Task Force Suggestions -“Circuit breaker” halt for 1 hour if a market moved the equivalent of 250 points on the Dow -Raise margin requirements in stock-index futures and let SEC regulate the futures as well as stocks -Better communications and contingency plans among federal authorities -Coordinate markets under one regulatory agency -Circuit breakers -Upgraded information systems to monitor transactions in related markets

6. What does “Circuit Breaker” mean? After an index has fallen a certain percentage, the exchange might activate trading halts or restrictions on program trading. For example, if the Dow Jones Industrial Average falls by 10%, the NYSE might halt market trading for one hour. There are other circuit breakers for 20% and 30% falls.

7. Who is Looking after the Investors? Reformers did not consider investor psychology as their primary concern, which left investors fearful that no one is in control. Uncertainty about the economy such as trade deficits and rising interest rates showed that recession is inevitable.